Retail Sales

Retail Sales

With the uncertainty of retail sales numbers out this morning, the market struggled to find direction yesterday.  The pop and drop pattern left behind would raise the possibility of a lower high at resistance if the bears were to happen to find some inspiration.  However, with analysts suggesting a solid retail sales number is likely yesterday may prove only to be a rest before stretching to new highs.  That said, anything is possible, and with earnings, inspiration to fuel the bulls market momentum could suffer.

Asian markets traded mixed during the night as the investors reacted to Biden-Xi talks with China selling slightly and Hong Kong surged higher.  Across the pond, European markets sport modest gains across the board.  U.S. futures began the morning in the red, but the bulls went to work pumping the premarket, which has become all too typical of late. Of course, anything is possible with the dollar showing strength, so buckle up the ride is about to begin.

Economic Calendar

Earnings Calendar

We have a much lighter day on the earnings calendar with just 44 companies listed, and several are unconfirmed.  Notable reports include HD, ARMK, DLB, DAVA, AQUA, JMIA, LZB, NTES, SE, SBLK, STNE, TDG, VREX, WMT, ZENV, ZEPP. 

News & Technicals’

October retail sales are expected to increase by 1.5%, boosted by early holiday shopping and higher gasoline prices.  Economists say the report will be essential to examine whether consumers are willing to spend, even as sentiment has weakened. In addition, the report should show that the effects of the Covid delta variant are fading, as parts of the economy are rebounding.  Home Depot topped Wall Street’s estimates for its third-quarter earnings and revenue.  Consumers were spending more when they visited, raising the average ticket by 12.9% to $82.38.  President Joe Biden signed the more than $1 trillion bipartisan infrastructure plan into law Monday.  The plan will put $550 billion in new money into transportation, broadband, and utilities. In addition, Biden made a case for Democrats’ $1.75 trillion proposals to invest in the social safety net and climate policy. Finally, Tesla CEO Elon Musk faces a potential tax bill of more than $10 billion on stock options granted in 2012.  Musk started exercising the options Monday, exercising $2.5 billion in shares and selling $1.1 billion of those exercised options to pay the taxes.  But he continued to sell the additional stock, and it’s likely those sales were unrelated to the stock option exercises he must complete by August. This means future stock sales are likely.  Treasury yield fell in early Tuesday trading, with the 10-year slipping to 1.6094% and the 30 pulling back to 1.9790%. 

The indexes struggled for direction yesterday, challenged by overhead resistance and facing the uncertainty of retail sales figures coming out before the bell this morning.  We will also hear from HD and WMT before the bell, the only likely market-moving earnings reports today.  Yesterday’s pop and drop in all four indexes set up possible lower highs, but with economists suggesting a solid retail sales number, it could be nothing more than a rest before reaching out for more new records.  However, with the decline in earnings inspiration and seeing a rising dollar, there is a concern of fading momentum and a possible risk-off scenario forming. As a result, a noticeable shift of energy into traditional defensive sector stocks, hinting at a possible rotation toward safety.  Stay with the overall trend but never forget how elevated this market has become.  A longer-term consolidation or a pullback is not out of the question, so have a plan to protect your capital because it can begin with breakneck speed!

Trade Wisley,

Doug

Consumer Sentiment

Consumer Sentiment

The worst consumer sentiment reading in more than ten years didn’t dissuade the bulls at all as they worked a nice Friday rally.  Retail will be in focus this week, with earnings from WMT, TGT, and HD, as well as last month's retail sales figures coming our way Tuesday morning.  It will be interesting to see if inflation and supply chain issues hampered the early holiday sales events.  With consumer debt hitting record highs, my guess is no, but we will soon find out.  Although the indexes remain very elevated, stay with the trend because the bulls seem to have no inflation concerns and want the party to continue. 

Overnight Asian markets closed with modest gains through China fell slightly even as their retail sales topped expectations.  European markets currently trade with modest gains and losses, as if searching for inspiration.  However, U.S. futures point to a bullish open, with the Dow suggesting a 100 point gap. Nevertheless, with new price resistance above, don’t rule out the possibility of a lower high or even a pop and drop pattern to occur if the bears find a reason to fight.

Economic Calendar

Earnings Calendar

We have a busy day on the Monday earnings calendar with nearly 300 companies listed, but many of them unconfirmed.  Notable reports include AAP, AND, AXON, SCPR, IBIO, JJSF, LCID, MGIC, OTLY, PLBY, RXT, STAF, COOK, TSN, WMG, STAF, COOK, TSN, WMG, XSPA.

News & Technicals’

Consumers will be a big focus for markets in the week ahead, with government retail sales data Tuesday and earnings from Walmart, Target, and Home Depot, among others. In addition, investors are watching the meeting between President Joe Biden and China President Xi Jinping Monday night for signs of any warming of relations on trade and other issues. According to contracts signed by four states, Apple requires states to maintain the systems needed to issue and service credentials at taxpayer expense.  The agreement, obtained through public record requests from CNBC and other sources, mainly portrays Apple as having a high degree of control over the government agencies responsible for issuing identification cards.  Apple has “sole discretion” for critical aspects of the program.  Last week, the European Commission, the executive arm of the EU, projected a GDP rise of 5% for both the EU and the euro area this year.  Some EU nations have started to see a high number of Covid-19 infections recently, mainly in countries where vaccination rates are still relatively low.  Austria and the Netherlands have imposed new social restrictions in the last few days.  Treasury yields look lower this morning, with the 10-year falling to 1.546% and the 30-year dipping to 1.9232% in early morning trading.

The indexes enjoyed a Friday rally choosing to ignore the worst consumer sentiment reading in more than ten years.  However, the VIX declined, and big tech rallied strongly to end a volatile week of price action.  This week we have a big focus on retail with earnings from WMT, TGT, and HD with a reading on Retail Sales figures Tuesday morning.  The SP-500 P/E Ratio eased slightly with last week's selling but remained strongly overvalued at 98% above the historical average.  The Buffett Indicator is a whopping 215% market value ratio to GDP, holding 72% above the historical average.  That said, the bulls seem to have no concern with the premarket activity working to inspire prices higher.  So stay with the trend and enjoy the party as long as it lasts!

Trade Wisley,

Doug

Tech Stocks Remained the Bright Spot

Tech Stocks Remained the Bright Spot

Although we saw modest selling yesterday, tech stocks remained the bright spot posting a gain while the industrials continued to slide lower.  However, the moves showed no fear, with VIX pulling back during the choppy light day of price action.  This morning, we will turn our attention to Consumer Sentiment and the JOLTS reports with a light day of notable earnings reports as the silly season begins to wind down.  Will the data inspire the bulls to close the week positively, or will it bring out the bears, adding to the inflationary worries?

Asian markets closed Friday, trading green across the board during the night, inspired by record Singles Day shoppers.  However, European markets trade mixed this morning with modest gains and losses.  With a lighter day of earnings inspiration and economic data coming later this morning, the U.S. futures point to a positive as they try to shake off inflation concerns.

Economic Calendar

Earnings Calendar

We have a much lighter day on the earnings calendar with 85 companies, but many of them remain unconfirmed.  Notable reports include AZN, DTEGY, VIVO, MFG, NGD, SPB, TOELY, & WRBY. 

News & Technicals’

During a politically significant press conference Friday, a top Chinese official gave a rare criticism of the U.S. and Western democracy.  The night before, Chinese President Xi Jinping joined the ranks of Mao Zedong and Deng Xiaoping in becoming the country’s third leader to oversee the adoption of a “historical resolution.”  While criticizing Western political systems, Chinese officials promoted their country’s agenda and emphasized new development models under Xi.  Alibaba and JD.com racked up around $139 billion of sales across their platforms on China’s Singles Day shopping event, setting a new record.  The record sales come despite worries about the strength of the Chinese consumer and the impact of Beijing’s crackdown on technology companies.  Singles Day was a slightly more muted affair as Chinese technology companies continue to face scrutiny from regulators and President Xi Jinping pushes for so-called “common prosperity.”  Treasury yields traded mixed early Friday morning, with the 10-year rising slightly to 1.5716% while the 30-year moved slightly lower to 1.9183%.

Yesterday proved to be a choppy day, but tech stock remained the bright spot for the market with a modest gain while the Dow slowly ground lower.  Worries of inflation elevated treasury bonds on Wednesday, and as of this morning, they continue to hold on to gains.  However, the gains in gold and silver have softened overnight while still holding essential support levels.  With earnings season beginning to wind down, we may turn more attention to economic data for inspiration.  Today, we will test the Consumer Sentiment report's temperature and see if we are making progress with the JOLTS numbers.  Today could be interesting with the institutions wanting to close the week on a strong note, while the bears may still want to test price support levels in the index charts that remain below current prices. 

Trade Wisely,

Doug

Bears Slowly React

Bears Slowly React

The bears slowly react to inflation, hitting a 30-year high after an early attempt to rally the markets as if it didn’t matter at all.  The wild speculative nature of this market is evident with the pricing of Rivian that has yet to produce 10,000 vehicles an expecting to lose more than 1.2 billion next quarter, now worth more than Ford and General Motors. Of course, that happens to be just another marker that is very reminiscent of the 1999 market bubble.   Look for the possibility of light and choppy price action today due to the Federal Holiday of Veterans day.

Asian markets traded mixed with Hong Kong surging 1% as Evergrande makes another last-minute payment to avert default.  European market trade mixed with modest gains and losses this morning.  With government offices and banking shutdown, U.S. futures point to a bullish open with tech leading the way, trying to recover some of yesterday's losses. 

Economic Calendar

We have a very rare day with nothing on the economic calendar due to Veterans day.

Earnings Calendar

We have more than 160 companies listed on the Thursday calendar, but there are quite a few unconfirmed small caps.  Notable reports include MARA, MT, ARRY, XAIR, BLNK, BRDCY, BHG, BAM, COUP, WATT, FRGI, FLO, GFI, RIDE, LAZR, OGN, SBH, SIEGY, TPR, UTZ, VPG, WB, WIX, & YETI.

News & Technicals’

Climate lawsuits will target banks and boards.  “I think that the next step is to start also litigating against financial institutions who make these emissions and fossil fuel projects possible,” said Roger Cox, the lawyer for Milieudefensie, an environmental campaign group and the Dutch branch of Friends of the Earth.  The Hague District Court on May. 26 ordered the Anglo-Dutch oil giant to reduce its global carbon emissions by 45% by the end of 2030, compared with 2019 levels.  The ruling marked the first time in history that a company had been legally obliged to align its policies with the Paris Agreement and reflected a watershed moment in the climate battle.  The congestion at U.S. ports, the trucker shortage, and the rise of e-commerce have created a unique opportunity for autonomous trucking, Embark Trucks CEO Alex Rodrigues told CNBC.  Embark has completed its SPAC merger and will begin trading Thursday on the Nasdaq under ticker EMBK.  Rodrigues will also become one of the youngest CEOs of a U.S. public company ever at 26 years old.  Disney added just 2 million Disney+ subscribers after more than 12 million last quarter. However, Netflix bounced back in the third quarter with 4.4 million net adds after just 1 million in the second quarter.  Disney, HBO Max, and AMC Networks were among the media companies affirming previously announced forecasts.

Although we saw the bears slowly react to the highest inflation reading in the 30 years, the selling appeared to be relatively controlled.  The VIX closed below a 19 handle, and the index charts held well above price and technical support levels. Nevertheless, yesterday’s selling reminded us that bears still exist and that overextended conditions can produce some painful selloffs.  I suspect today could be a very muted day with the observance of the Federal holiday of Veterans Day.  Though there may be some local exceptions, banking and all government offices are closed.  As a result, we could see light and choppy price action trading today.

Trade Wisley,

Doug

Inflation Worries

Inflation Worries

There was a modest experience of the bears yesterday as the inflation worries increased with increased producer prices.  Today that worry continues with a reading on consumer prices before the bell.  Economists expect CPT to increase to its highest level in nearly 30 years, so buckle up the stage is set for some price volatility at the open.  With Bullard suggesting two rate hikes next year and the Fed warning investors of potential sharp market declines, it's understandable traders are a little on edge this morning.

Asian markets mostly declined overnight, with the Chinese developer Fantasia prices plunging by nearly half as the real estate crisis worries investors.  European market trade mixed and near the flatline with all eyes focused on U.S. inflation data.  Ahead of CPI, Jobless numbers and another big round of earnings futures point to lower open, but anything is possible by the open as we react to the inflation data. So prepare for an extra dose of price volatility that could easily include head fakes and whipsaws.

Economic Calendar

Earnings Calendar

We have another busy mid-week earnings calendar with more than 230 companies listed, with a number of them unconfirmed.  Notable reports include DIS, ADDYY, AER, AFRM, AWH, ATO, BZH, BYND, BMBL, TAST, HLTH, ENR, GSL, DGRX, HGBL, IFNNY, KGC, LZ, LX, NGMS, PRGO, PTE, RRGB, RSI, SIEN, SMRT, SOFI, TCEHY, WEN, WWW, & ZIP.

News & Technicals’

Central banks would usually push up rates to tame inflation, and the Fed has started to normalize policy after the economic fallout from the coronavirus pandemic.  It said last week that bond purchases would start to taper “later this month.”  The Fed also acknowledged that price increases had been more rapid and enduring than central bankers had forecast.  Economists expect the consumer price index to rise 0.6% in October and 5.9% on a year-over-year basis, the most since 1990.  The CPI is hotter than economists initially expected, and they now see it staying elevated into next year.  “What we’re seeing is there’s this second wave of inflation that appears more broad-based, and it’s also backed up with a sharp increase in wages,” said one economist.  This is not the first time the EU’s General Court has ruled on an antitrust case brought by the European Commission and directed at a tech giant Google.  Wednesday’s verdict can be appealed and taken to the EU’s highest court.  The EU is currently discussing how to toughen its rulebook to ensure fairer competition across the 27 member nations. Rivian had previously raised its expected price range to between $72 and $74, up from an initial range of $57 to $62.  The company, which Amazon and Ford back, recently began production on its electric pickup, the R1T, and plans to deliver 10,000 as soon as next year.  Rivian expects to lose up to $1.28 billion this quarter while generating no more than $1 million in revenue for the period.  Treasury Yields moved higher this morning, with the 10-year trading up to 1.4796% and the 30-year rising to 1.8519%. 

With inflation worries on the mind of investors, the market broke its record-setting streak yesterday with some modest selling.  Inflation weighs on the market this morning as well, with the pending CPI report before today’s bell.  Economists expect the number to come in at its highest level in nearly 30 years. In addition, the Fed late afternoon yesterday warned that the recent rally in the market has the potential to trigger an abrupt crash.  That will make a person wonder if the Fed thinks the CPI might come in higher than expectations?  Because there is little in the way of price support for the recent rally, a substantial selloff is undoubtedly within the realm of possibility.  However, with the current bullish energy, it is also possible we could experience a sharp rally today if the number comes in better than expected.  Plan your risk carefully as the price volatility could be high, and intraday whipsaws have the room to be quite punishing to those rushing into the fray this morning.

Trade Wisely,

Doug

Records Across the Board

Though we experienced modest pop and drop patterns in the index charts, we still managed closing records across the board.  The daily records in the Dow hit its 8th straight day not seen since 1997 even has the VIX rallied.  Today we will get a reading on inflation with the Produce Price Index, and consensus is looking for a slight month over month increase.  If it were to come in hot, will it wake up the bears, or will it just keep ignoring the impacts on the economy?  Stay tuned; we will find out soon.

Overnight Asian markets traded mixed as the real estate price declines are beginning to raise some contagion concerns from the Fed.  European markets trade mostly higher, but gains are modest as they keep an eye on the pending inflation data. Finally, with a big day of earnings, PPI, and more Fed speak, U.S. futures suggest a flat open except for the continued push in the Nasdaq. 

Economic Calendar

Earnings Calendar

We have a big day on the Tuesday earnings calendar with 250 companies listed, but many of them are small-cap.  Notable reports include COIN, ADT, ACB, AXON, BAYRY, BNTX, APRN, ELY, CAH, CCEP, DHI, DASH, EGRX, EBIX, FTEK, GLNG, HAIN, TWNK, IIVI, INO, IGT, JBI, JAZZ, NDUT, MNKD, MCFE, MLCO, NIO, PLTR, PAAS, PRTY, POSH, PUBM, RNG, SGMS, STWD, SYY, U, UPST, WES, WRK, WKHS, & WYNN.

News & Technicals’

The White House on Monday said businesses should move forward with the requirements despite the court-ordered pause.  The U.S. Court of Appeals for the 5th Circuit considered one of the most conservative appellate courts in the country, halted the requirements Saturday pending review. In addition, Republican attorneys general in at least 26 states has challenged President Joe Biden’s vaccine and testing requirements in five different U.S. appeals courts.  The Biden administration asked the court to lift the pause Monday evening, claiming it could cost dozens or hundreds of lives per day.  “Stresses in China’s real estate sector could strain the Chinese financial system, with possible spillovers to the United States,” the Federal Reserve said Monday in its financial stability report, released twice a year.  “The nexus of the Fed’s concern is that China’s real estate activity is slowing, but the developers have large debts [and] some of them (like Evergrande) are diversified into other areas of the economy,” said Paul Christopher, U.S.-based head of global market strategy at Wells Fargo Investment Institute.  The bulk of the report discussed domestic U.S. financial conditions, and analysts downplayed the significance of the Fed’s comments on China real estate.  Treasury yields dipped early this morning, with the 10-year dipping slightly to 1.488% and the 30-year falling to 1.8835%.

Closing records across the board in all for indexes with the Dow hitting its 8th straight daily record in a row which has not been seen since 1997.  At the same time, the VIX rallied for the 3rd day while the price action in the indexes largely chopped sideways.  The T2122 indicator continues to ring the bell that the indexes trade in a short-term overbought condition, but bulls are having none of it as they continue to push higher.  Technically speaking, the odds of consolidation or pullback continue to grow.  That said, the relentless buying is unwise to fight, so stay with the trend but have a plan in place because the tumble from these hights would likely be very painful.  Today we will get a reading on inflation with the PPI.  However, even if the number comes in hot, we may ignore it and keep plowing in new records but ready if it wakes up the bears.

Trade Wisely,

Doug

No Stopping the Bulls

No Stopping the Bulls

Although the index charts have gone parabolic, there is no stopping the bulls from setting records daily.  Logic would suggest that the odds of a substantial pullback are growing, so watch carefully for the classic pop and drop possibility as the futures point to a gap up open.  That said, it’s also not wise to fight a relentless bull because there is no telling how long it can push higher.  However, avoid extended stocks with the fear of missing out and plan your risk carefully because when the bears do show themselves, the move lower could be swift and painful. 

Asian markets began the week trading mostly lower, and as energy prices and rapidly declining real estate prices worry traders.  European markets trade mixed but mostly lower this morning with muted gains and losses.  However, with earnings fanning the fire, U.S. futures show nothing but green, with the Dow pushing for another record open. 

Economic Calendar

Earnings Calendar

To kick off a new trading week, we have 200 companies listed on the earnings calendar.  Notable reports include PYPL, DDD, ACAD, CBT, CXW, COTY, FWRG, FTK, FRPT, NVTA, LMND, OCN, PSTL, APTS, RBLX, SDC, TME, TSEM, TTD, TRIP, SPCE, WOW, & ZNGA.

News & Technicals’

Since August, Walmart and Silicon Valley start-up Gatik said that they’d operated two autonomous box trucks, without a safety driver, on a 7-mile loop daily for 12 hours.  “Taking the driver out is the holy grail of this technology.” Gatik CEO Gautam Narang, who founded the company in 2017, told CNBC.  In a Twitter poll launched Saturday, Musk said: “Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock. Do you support this?”  The billionaire gave people the option to vote “Yes” or “No” and pledged to abide by the poll results, whichever way it went.  Some 3,519,252 people responded, and 57.9% of them voted for “Yes.”  The U.S. on Monday will lift a pandemic travel ban on international visitors from more than 30 countries after 19 months.  New rules will replace the ban, requiring international visitors to show proof of vaccination and a recent negative Covid test.  Exceptions include travelers under age 18 and those traveling from countries with low vaccine availability.  Treasury yields begin the week slightly higher, with the 10-trading up to 1.474% and the 30-year rising to 1.8999% early this morning.

Though the SP-500 current P/E ratio is 99% above the historical average, there is no stopping the bulls at this point.  During the 1999 tech bubble, the same ratio hit 132%, and I guess this record-setting market may also want to take that record.  The T2122 indicator also indicates a short-term overbought condition, so with the futures gapping to new records, be on guard for the possibility of a pop and drop pattern.  That said, avoid fighting a relentless market because there is no way to know when it might finally stop.  However, stay focused because, with this extension, the reversal down could be very punishing.  Remember, market internals indicate the economy is slowing due to the crushing impacts of inflation.  Nationally gas prices are up $1.32 per gallon in just the last 11 months, and I suspect they only go higher as we head into winter.  That adds cost to everything we do or buy, robbing consumers of disposable income every day it’s allowed to continue.

Trade Wisely,

Doug

Going Parabolic

Going Parabolic

As traders rush to buy tech, it’s hard to ignore that the QQQ chart is going parabolic as we look for another gap up in the QQQ this morning.  Analysts expect today’s employment situation number to come in very bullish, so maybe the buying party continues into the weekend.  However, carefully plan your risk and remember to take some profits noting that the economic situation in China continues to worsen.  Odds of a pullback continue to grow, so don’t be the last the last dollar in the door chasing extended stocks.

Overnight Asian markets mostly sold off with the news of another developer default as their real estate crunch continues. However, European markets show modest gains across the board after the BOE maintained rates but began tapering easy money policies.  Ahead of the employment situation report and a lighter day of earnings, the Dow and Sp-500 futures trade muted with the Nasdaq suggesting a gap to new another new record. 

Economic Calendar

Earnings Calendar

We get a little break from the breakneck pace of earings this week with just 105 companies listed and a good number of them unconfirmed.  Notable reports include AMCX, CGC, D, DKNG, ELAN, FLR, GCI, GT, GRPN, HMC, JCI, DOC, & PNW.

News & Technicals’

Analysts expect the economy to have added 450,000 jobs in October, according to estimates from Dow Jones. That’s up sharply from 194,000 in September. In addition, they see hourly wages rising by 4.9% on a year-over-year basis. That will be a significant number since the market sees inflation and whether it will continue to run hotter than expected.  The jobs report is back in focus as a critical input for the Fed, which announced plans to start tapering back its bond purchases this month. That opens the door to potential interest rate hikes next year, economists say.  Asad Rehman, a spokesperson for the COP26 coalition, a U.K.-based civil society representing indigenous communities, frontline activists, and grassroots campaigns from the global south, told CNBC that he had been struck by the comparisons between the meeting in Glasgow and previous talks in Copenhagen.  The 2009 summit in Denmark’s capital city is widely regarded as a failure, with a deal many countries criticized for falling short of the action needed to tackle the climate crisis.  The summit continues after pledging $18 billion to end the use of coal. 

The Nasdaq’s surge continues to set records, the chart now going parabolic and looking to gap higher ahead of the employment situation report. However, plan your risk carefully and prepare as we continue to extend because simple logic would suggest the odds of a substantial pullback growing with every tick higher the indexes extend.  At some point, we will hit a point of exhaustion, and when that last dollar is in, look a sideways move at a minimum and more likely a strong profit-taking selloff. 

Trade Wisely,

Doug

105 Billion Per Month

105 Billion Per Month

The Fed will back off ever so slightly on its easy-money policies but continue to print debit at a rate of 105 billion per month despite the inflationary pressures.  Without a doubt, the market loves all the printing, setting new records on the news with the IWM joining in for the first time this year. So let the party continue but keep in mind this rally is getting long in the tooth, and rest is well overdue.

Asian market rallied with green across the board overnight in reaction to the Fed decision.  This morning, European markets are also in a bullish mood with the easy money policies tapering only slightly. However, with a massive day of earnings and Jobless data ahead, U.S. futures point to a muted open except for the Nasdaq gapping to another record at the open.

Economic Calendar

Earnings Calendar

Today, we have a massive day of reports with more than 350 companies listed on the earnings calendar.  Notable reports include SQ, MRNA, ACIW, WYNN, APD, ABNB, ALL, AIG, ABC, AAOI, APTV, GOLD, BDX, CNQ, CARS, CVNA, CC, LNG, CI, CTXS, CLNE, ED, CS, CUBE, CYBR, DDOG, DPSGY, DIN, DBX, SUK, EGLE, LOCO, ENDP, EOG, EXPE, FSLR, FTNT, FNKO, GOGO, GPRO, GPRE, GPP, HBI, HL, IAC, IHRT, ILMN, K, LITE, MCHP, MNST, NKLA, NTDOY, NLOK, NVAX, NRG, PH, PTON, PENN, PINS, PLNT, REGN, RKT, SHAK, SWKS, SO, SFM, RUN, SSYS, SYNA, TGH, TM, HEAR, UBER, OLED, VIAC, W, WWE, WW, YELP, & ZTS.

News & Technicals’

The Federal Reserve said Wednesday it would begin tapering the pace of its asset purchases later in November.  The reduction will see $10 billion less in Treasurys and $5 billion less in mortgage-backed securities every month.  There also was only a slight change to Fed’s view on inflation. The post-meeting statement kept the word “transitory” to describe price increases running at a 30-year high. However, it qualified the term somewhat by saying pressures are “expected to” be temporary.  Chairman Jerome Powell said he expects conditions pushing inflation to last “well into next year.′  In its shareholder letter, the company said the slowdown results from “global supply chain disruptions that have impacted the U.S. TV market.”  “The pandemic continues to disrupt global supply chains,” CFO Steve Louden told CNBC.  “For the TV industry, you’re having elevated component pricing, inventory availability issues, and supply chain logistics delays,” he said.  Treasury yields traded mixed this morning, with the 10-year dipping to 1.5735% and the 30-year rising slightly to 1.9958%.

Markets love money printing rising after the Fed said it would continue printing at the pace of 105 billion per month.  We are a market inflated by massive debit at taxpayer expence, and we can’t seem to get enough of it!  That said, we set new records in all four indexes as the IWM joined in on the party busting through more than a year of price resistance. So stay with the trend but always be on guard because a tumble from these heights could be painful and simple logic would suggest a rest is well overdue. 

Trade Wisely,

Doug

Ravenous Appetite for Risk

Ravenous Appetite for Risk

We continue to set index records with stock, with P/E ratios burgeoning as the bulls continue their ravenous appetite for risk.  The chart technical's and the price action show no clues that the trend is ready to stop.  However, it would be unwise to assume we will never pull back and chase already extended stocks so late in the rally. So today, expect choppy action ahead of the FOMC decision on taper and prepare for the typically wild volatility directly after the announcement.   

Asian markets traded mixed but mostly lower overnight with modest gains and losses.  European markets also trade flat this morning as they wait on the Fed and the news that the Bank of England may soon raise rates.  With a massive day of earnings data, ADP, and the Fed decision later this afternoon, the U.S. futures point to a mixed open with modest gains and losses as we wait.

Economic Calendar

Earnings Calendar

On the hump day earnings calendar, we have more than 300 expected to report today.  Notable reports include ALG, ALB, AMRN, APA, AAWW, BKNG, BWA, CPRI, CF, CAKE, CLH, CVS, DISCA, ELF, EA, EMR, ET, ETR, ETSY, EXC, FSLY, FSR, FOXA, FDP, GDDY, HR, HFC, HST, TWNK, HUBS, HUM, H, IAG, INFN, IR, KTOS, LCI, LBTYA, LL, MRO, MAR, MAR, MBI, MET, MGM, NCLH, NVO, NUS, OMP, PETQ, PXD, PBI PBPB, QRVO, QCOM, QLYS, RYN, RCII, ROKU, SMG, SBGI, SWN, RGR, SPWR, TTWO, TRUE, WING, & XP. 

New & Technicals’

The Regional Comprehensive Economic Partnership or RCEP will come into force in January 2022.  Australia and New Zealand were the latest to ratify the world’s largest trade agreement.  Other countries that have ratified RCEP include Brunei, Cambodia, Laos, Singapore, Thailand, Vietnam, China, and Japan, according to Australia’s Department of Foreign Affairs and Trade.  Policymakers have intimated that a hike is imminent, but the nine-member MPC will need to determine whether to tighten policy this week or wait until its mid-December meeting. Markets are uncertain about the timing, with analysts suggesting the vote is likely to be split. However, at Monday’s close, market data showed that derivatives traders were pricing in a 64% probability of a 15 basis point rate hike this week, Berenberg highlighted in a note Tuesday.  Zillow said it’s winding down its homebuying unit, called Offers, which competes with Opendoor.  The company said it’s cutting 25% of its workforce in eliminating the unit after reporting disappointing earnings results.  Ahead of the FOMC decision, U.S. Treasurys pulled back in early morning trading, with the 10-year dipping to 1.5243% and the 30-year sliding to 1.9335%.

Another day and more records set in the DIA, SPY, and QQQ as the ravenous appetite for risk appears to have no bounds.  Though the extension in the indexes seems extreme, there is no sign that it's ready to stop.  The current SP-500 P/E Ratio is more than 96% above the historical average, suggesting a strongly overvalued condition.  The only time this level was higher in history was the 1999 internet bubble when it reached 132%.  So, that would suggest the party may still have plenty of life but let's not forget the ramifications of such an extension when the party’s over.  Today we will be in wait and see mode until the FOMC decision and the question is answered on a taper.  At the risk of sounding like a broken record, be careful chasing already extended stocks and be ready for the typical Fed volatility whip after the announcement.

Trade Wisley,

Doug

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